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Locating and Expanding in Kentucky

Kentucky Business Incentives & Financial Programs

Kentucky's pro-business climate provides a number of incentives for businesses. The Kentucky
Economic Development Finance Authority (KEDFA), established within the Cabinet for Economic
Development to encourage economic development, business expansion, and job creation,
provides financial support through an array of financial assistance and tax credit programs.
Helping businesses in this way furthers the Commonwealth's goals of achieving long-term
economic growth and employment opportunities for its citizens.

KEDFA approval is required for participation in the loan and tax incentive programs, except
the Skills Training Investment credits, which are approved by the Bluegrass State Skills
Corporation (BSSC). KEDFA meets the last Thursday of each month. Projects must be received
by the last Friday of the month prior to the KEDFA meeting date in order to be considered.

To find out if your business qualifies contact the
Department for Business Development where a professional economic development
agent will be assigned to work with you. Your agent can answer your questions and
guide you through the application processes.

New and Expanding Industry

Kentucky Business Investment (KBI) Program
– (PDF)
Provides income tax credits and wage assessments to new and existing agribusinesses,
regional and national headquarters, manufacturing companies, and non-retail service or
technology related companies that locate or expand operations in Kentucky. Projects
locating in certain counties may qualify for enhanced incentives.
Click here to view a map of the
enhanced incentive counties.

Kentucky Enterprise Initiative Act (KEIA)(PDF)
For new or expanded service or technology, manufacturing, or tourism attraction
project in Kentucky. KEIA provides a refund of Kentucky sales and use tax paid by
approved companies for building and construction materials permanently incorporated
as an improvement to real property. It is also available for Kentucky sales and use
tax refunds for eligible equipment used for research and development and data
processing equipment.

Direct Loan Program (KEDFA) (PDF)
KEDFA encourages economic development business expansion and job creation by
providing business loans to supplement other financing. The Direct Loan Program
provides loans at below-market interest rates (subject to the availability of state
revolving loan funds) for fixed asset financing for agribusiness, tourism,
industrial ventures, or the service industry. Retail projects are not eligible.

Industrial Revenue Bonds - IRB (PDF)
IRBs issued by state and local governments in Kentucky can be used to finance
manufacturing projects and their warehousing areas, major transportation and
communication facilities, most health care facilities, and mineral extraction and
processing projects. Click here
for the IRB Procedures.

Job Retention

Kentucky Reinvestment Act (KRA) - (PDF)
Provides tax credits to an existing Kentucky company engaged in manufacturing and
related functions on a permanent basis for a reasonable period of time that will be
investing in eligible equipment and related costs of at least $2,500,000.

Kentucky Industrial Revitalization Act (KIRA) PDF
Investments in the rehabilitation of manufacturing or coal mining and processing
operations that are in imminent danger of permanently closing or that have closed
temporarily may qualify for tax credits. An eligible company shall also include one
that has closed but resumes mining operations. Eligible entities include
manufacturing companies that save or create 25 jobs and coal mining and processing
companies that intend to employ a minimum of 500 persons and have a raw production
of at least three million tons from the economic revitalization project facility.

High-Tech

SBIR-STTR Matching Funds Program
The Cabinet will match, on a competitive basis, Phase 1 and Phase 2 federal Small
Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
awards received by Kentucky high-tech small businesses and those willing to become
Kentucky-based businesses. This includes matching Phase 1 federal awards up to
$150,000 to support the exploration of the technical merit or feasibility of an idea
or technology, and up to $500,000 of federal Phase 2 awards, which support
full-scale research and development.

Commonwealth Seed Capital LLC
Commonwealth Seed Capital, LLC, (CSC) is an independent fund that makes debt or
equity investments in early-stage Kentucky business entities to facilitate the commercialization
of innovative ideas and technologies.

Investments are typically made in these specified innovation areas: health and human development;
information technology and communications; bioscience; environmental and energy technologies; and
materials science and advanced manufacturing.

CSC invests in companies that have a significant Kentucky presence, the prospect for substantial growth,
and the potential to generate an appropriate rate of return. For more information, contact:

Kentucky Enterprise Fund
The Kentucky Enterprise Fund provides seed-stage
capital to Kentucky-based companies that are commercializing a technology-based
product or process. The funds exist to stimulate private investment in
Kentucky-based technology companies with high growth potential. The Kentucky Science
and Technology Corporation administers the funds under contract with the Council on
Postsecondary Education.

Energy and Environment

Kentucky New Energy Ventures Fund
The Kentucky New Energy Ventures Fund provides seed stage capital to support the
development and commercialization of alternative fuel and renewable energy products,
processes, and services in Kentucky. The funds exist to stimulate private investment
in Kentucky-based technology companies with high growth potential. KNEV makes
grants of $30,000 and investments ranging from $250,000 to $750,000+. Qualified
companies must be Kentucky-based and funds are to be used for business development
activities.

Incentives for Energy Independence Act – IEIA (PDF)
Requires a capital investment of at least $25 million for an alternative fuel
facility using biomass, or an investment of at least $100 million for an alternative
fuel facility using coal, as its primary feedstock. A capital investment of at
least $1 million is required for a renewable power facility that meets minimum
electric output standards based upon the power source. The negotiated incentives
cannot exceed 50 percent of the capital expenditures and may include a reimbursement of
sales and use taxes paid on tangible personal property; a tax credit of the income
tax and limited liability entity tax owed by the company; and, wage assessment
incentives up to 4 percent of gross wages of each employee whose job was created as part of
the project. Advanced disbursements may also be available.

Kentucky Environmental Stewardship
Act (KESA) (PDF)
For companies manufacturing products that have a substantial positive impact on
human health and the environment. Companies with projects approved under KESA must
have at least $5 million in eligible cost and can potentially recover up to 25 percent of
the projects fixed asset cost and 100 percent of employee skills training. The tax
incentive is available for recovery over a 10-year period.

Entrepreneurs & Small Business

Kentucky Small Business Credit Initiative (KSBCI)
Designed to generate jobs and increase the availability of credit by reducing the risks
participating lenders assume when making loans to small businesses. Using three distinct
credit enhancement programs, KSBCI will help lenders finance creditworthy small businesses
that would typically fall just outside of their normal lending guidelines. Please
click here for a listing of approved projects.

Small Business Loan Program (PDF)
The Small Business Loan Program is designed to help small businesses acquire funding
needed to start or grow their small business. A small business must be engaged in
manufacturing, agribusiness, or service and technology. Loan funds may be used to
acquire land and buildings, purchase and install equipment, or for working capital.
The minimum loan amount is $15,000 and the maximum is $100,000. The approved company
must create one new full-time job within one year of the loan closing. KEDFA can
fund up to 100 percent of the project costs and the loan can be used in conjunction with
other lenders. The term of the loan can range from 3-10 years.

The Kentucky Small Business Tax Credit (KSBTC)
The KSBTC program is designed to encourage small business growth and job creation by
providing a nonrefundable tax credit to eligible businesses hiring one or more
eligible individuals and investing at least $5,000 in qualifying equipment or
technology. With certain exceptions, most for-profit businesses with 50 or fewer
full-time employees are considered eligible for this program. The KSBTC program is
limited to allocating a total of $3 million in tax credits per state fiscal year.

Angel Investment Tax Credit
The Kentucky Angel Investment Tax Credit offers tax credits of up to 50 percent of an investment in Kentucky small businesses. Prior to investment, both the investor and small business must submit applications for certification. Each investment must be certified in advance as well. Refer to the Kentucky Angel Investment Tax Credit Fact Sheet for program details and qualifying criteria.

Tax Increment Financing (TIF)

Tax Increment Financing (TIF)(PDF)
Tax Increment Financing (TIF) is an economic development tool to use future gains in taxes to finance the current improvements that will create those gains. The state participates with local governments and eligible agencies in three TIF programs:

EB-5 Immigrant Investor
EB-5 is an opportunity for immigrants to invest in the United States in exchange for green card eligibility for themselves and qualifying family members.

Tourism Development

The following tourism-related incentives are administered through the Kentucky Tourism,
Arts and Heritage Cabinet.

Tourism Development Act
The Tourism Development Act provides developers of approved new or expanding tourism
projects the ability to recover up to 25 percent of the project’s development costs over a
10-year term. Projects including, but not limited to, lodging facilities
constructed on state park, federal park or national forest lands are eligible to
recover up to 50 percent of the development costs over a 20-year term.

Kentucky Film Incentive
The Kentucky Film Incentive is designed to encourage the development of the film
industry in Kentucky. The incentive provides qualifying applicants the ability to
recover up to 20 percent of qualified expenditures through a refundable income tax credit.
Qualifying applicants must invest a minimum of $50,000 for documentaries and
national touring Broadway shows, $200,000 for commercials, $500,000 for full-length
films.